Terry v. Wisconsin Marine & Fire Insurance

By the Court, Paine, J. Tbe city of Milwaukee issued its bonds to tbe amount of $166,000 in aid of tbe Milwaukee & Horicon Railroad. It received a second mortgage on tbe road and tbe bond of tbe company as security. Tbe road was afterwards sold on the first mortgage in pursuance of an arrangement among those interested, and a surplus of over $90, 000 came into tbe bands of tbe commissioners of the public debt of tbe city of Mitwaukee, as applicable to tbe security of tbe city as second mortgagee. In was deposited by them with the bank which is defendant in this proceeding. And tbe plaintiff, a judgment creditor of tbe city, seeks to reach tbe fund and apply it to the payment of bis debt. ■ We shall not stop .to inquire whether tbe fund could be thus reached if there were no special provisions of law in regard to it; for in this case there are such provisions which show beyond doubt that it cannot. Chapter 80, Gen. Laws of 1861, authorized tbe city to devote all securities or property which it bad received or might receive on account of bonds issued in aid of railroad companies, as a special trust fund for tbe payment of its outstanding bonds on account of which they were received. And it expressly provided that while so held, they should not, “in any case or in any manner be subjected to tbe payment of any other city debt than that to tbe payment of which it is [they were] so devoted in trust.” Tbe common council, by resolutions, as required by tbe act, set apart this fund for the payment of tbe bonds issued in aid of the road, by the sale of which the fund was produced. It cannot be applied to the plaintiff’s debt. The judgment is affirmed, with costs. [91] Note, — On a motion for a rehearing, Mr. Stake, for the appellant, argued as follows : The first section of the act of 1861 is inapplicable to this ease. Prior to the service of the garnishee summons, none of the securities of the city, received from the Horicon Railroad Co., had been sold, assigned, exchanged or otherwise 'disposed of, within the meaning of that section. The second mortgage of the city, by the foreclosure of the first mortgage, was extinguished, and the money received by the city was received as a payment upon or in virtue of such second mortgage and the bonds accompanying the same. The mortgage was collected, not disposed of, and the money was received, not in exchange for, but upon extinguishment and satisfaction of the mortgage lien, and as a payment upon the bond. Exchange or other disposition of the mortgage implies its continued force as a security. The second section seems to have been framed to enable the city, in a certain prescribed manner, to exempt property received and held for the same purpose as this money, from liability to be “ subjected to the payment of any other city debt than that to the payment of which it” may have been “ devoted in trust ” in accordance with said section. The trust to be declared by the city is not for the bondholder but for the city, and is merely a means to secure such exemption. The act itself does not purport to exempt the money, but assumes its liability to “be subjected to the payment of any other debt,” and leaves the city, in a prescribed manner, to restrict the liability. Exemptions are not to be assumed or implied, but must rest upon clear provisions of law. where the exemption is not effected by the terms of the law, but is to result from certain prescribed acts of public officers, a strict and full performance of all those acts is necessary to make the exemption operative. Now the law says the common council may, by resolution, declare that any of the securities or property mentioned in the first section “ shall be held in trust by the city treasurer ” &c., and “prescribe the terms and periods of time on and for which they shall be so held or made available, and while such stocks &c. are so held, they shall not * * be subjected to the payment of any other city debt ” &c. The act thus requires the creation or declaration of a trust, the designation of a trustee, the naming of the subject of trust, and the definition of its terms and duration. All this must be done, and the property which is the subject of the trust must be in the possession and under the control of the trustee, before the object of the section is attained. But by the resolutions of the council, the trust, if any was attempted to be created under this act, was in the city treasurer as the sole trustee; its subject was not money but 5-20 U. S. bonds; it was not to commence and could have no existence until the 5-20s were surrendered to the city treasurer, the trustee. But the money was never invested in 5-20 bonds; and neither money nor bonds were ever surrendered to or held by the city treasurer, the trustee. When the garnishee process was served, the money remained on deposit in the bank to the same credit to which it had been originally deposited by the commissioners of the public debt. Again, the supposed trust was, by the terms of the resolution, to be unlimited in duration, no time being prescribed “ for which they shall be so held;” and such unlimited trust was not authorized by the law. The city having therefore failed to create a trust as provided by the act, and the designated trustee never having received or held the bonds which were to be the sole subject of the trust, nor even the money with which they were to be purchased, it follows that the exemption of the money from process was [92] not effected. See Drake on Attachments, sec. 525; 14 Ill., 342; Briggs v. Block, 18 Mo., 281; Sproule v. McNulty, 7 id., 62; 2 Speers, 519; Brown v. Foster, 4 Cush., 214. The motion for a rehearing was denied. — Rep.